Foreign investors are hungry for U.S. multifamily real estate, as one local firm has found.
Bethesda's Excelsa Holding has raised its second equity fund from international investors looking to acquire properties in the United States. It took just three months to raise $154 million, a big upswing from its first, $85.6 million round in 2016. With it, Excelsa is looking largely for multifamily deals in Greater Washington and the Sun Belt, though it is willing to consider a wider range of property types, said Khalil Hibri, head of business development.
Founded by former Credit Suisse Middle East and North Africa co-CEO Bassam Yammine, Excelsa got its North American start buying properties in D.C. during the Great Recession. It specializes in "value-add" and "core-plus" properties, which is to say those that are almost fully occupied and performing well, but might be a few decades old. There, it can invest in upgrades and see an upside once it increases the rent.
With a significant second fund in hand, the company says it can look to bigger deals — acquisitions requiring $30 million to $50 million in equity, Hibri said. The Sun Belt has strong fundamentals and Excelsa has already inked two recent deals in South Carolina, both in the pre-launch phase of the fund using bridge loans.
Given how hot the real estate market is, the company is widening its focus to include self-storage and industrial properties both existing and in development. Eventually, Excelsa might launch a special fund for these types, Hibri said but for now it's looking at them on a one-off basis.
"We've been pretty conservative, assuming operating cap rates will be higher than entry cap rates," Hibri said, referring to the rent-income-to-market-value ratio that real estate investors use to gauge rate of return on an investment. "And we've been good at digging up off-market deals."
Its recent Sun Belt focus doesn't mean Excelsa will overlook the D.C. area — the company acquired the 226-unit Tribeca at Camp Springs in Prince George's County last year. But Greater Washington has its challenges that make it less attractive, such as D.C.'s Tenant Opportunity to Purchase Act regulations that increase the lead time on deals, which he said has made the deal flow here lighter.
The company's investors are almost entirely from family offices and high net-worth investors from the Middle East and Gulf States. Many already have experience investing in multifamily, and all of the existing investors in the first fund signed on for more in the second, Fadi Majdalani, managing partner of Excelsa, said in a statement. The company, which has operations in the U.S. and the Middle East, says it has $420 million in assets under management and 2,500 in multifamily units.
